Hitachi fiscal Q1 loss shrinks as sales rise

Hitachi Ltd.'s fiscal first quarter net loss narrowed from the year-ago period on higher revenue boosted by strong global demand for capital equipment although weakness persists in segments of the U.S. market.

Sales to Europe, Asia, excluding Japan, and other parts of the globe grew at a double-digit rate and contributions from Japan rose 8 percent in the latest quarter offset by a 5 percent decline in the North American market where demand weakened for consumer products, including flat-panel TVs, according to Hitachi.

The Japanese company said it sees revenue rising 4 percent during its fiscal first half ending September 30 from the comparable 2006 period as all economic regions of the world continues to strengthen and as Japan recovers from an ongoing inventory correction.

Hitachi posted a net loss of $111 million for the three months ended June 30, compared with a net loss of $179 million for the 2006 comparable quarter. Revenue during the period rose 10 percent, to $20.1 billion, from $18.3 billion in the fiscal 2006 first quarter.

While Hitachi forecasts an increase in sales for its fiscal first half, the company noted that weakness in the U.S. housing sector could impact the global economy.

"Hitachi expects the U.S. economy to continue rising, backed by solid corporate earnings and favorable employment and wage environments, but a remaining concern is the current sub-prime loan problem," the company said in a statement.

"European economies should remain solid, chiefly due to capital investment and consumer spending," Hitachi added. "Furthermore, Asian economies are projected to remain strong, driven by high economic growth in China."

Power and industrial lead

Hitachi's improved results reflect strong contribution from the company's power and industrial systems division, which posted a 22 percent increase in revenue to $5.96 billion. The unit's operating income more than doubled to $199 million, Hitachi said.

Sales in the high functional materials and components business also improved, "principally in automotive-related products and IT equipment and household appliance-related products such as for LCDs," the company said.

Hitachi Chemical Co. Ltd., a supplier of materials to the semiconductor industry and Hitachi Cable Ltd., which sells wires and cables, also reported higher sales.

Other units weren't as impressive, however. The information and telecommunication systems division recorded a 10 percent increase in revenue but the unit posted a wider operating loss due to problems at Hitachi Global Storage Technologies, the company's hard disk drive business.

The digital media and consumer products group was also hurt by weaker-than-expected flat-panel TV demand in North America. Revenue at the unit fell 2 percent and its operating loss widened 39 percent, to $183 million.

Cost-cutting to continue

Hitachi said it is intensifying efforts to reduce losses at several key business units, including in the hard disk drive and flat-panel TV units.

The company is exploring plans to increase collaboration among its diverse business units to help reduce operating costs and leverage their purchasing capital.

"Hitachi will continue efforts to create new businesses and strengthen targeted businesses by maximizing the use of its resources, such as R&D, marketing capabilities, personnel and its funding system," the company said.

"Also, Hitachi will continue to leverage group-wide synergies to reduce procurement costs, business expenses, IT operational costs and other costs by standardizing and integrating business operations," it added.

As part of the ongoing reorganization, Hitachi said it will continue to expand overseas, a move that would help the company further improve margins through the relocation or establishment of plants in parts of Asia where labor costs are substantially lower.